Chevron Australia's staggered maintenance at Gorgon LNG alleviates market concerns

Singapore — Chevron Australia will undertake staggered maintenance at Trains 1 and 3 of its Gorgon LNG plant in Western Australia, the company said Aug. 21, confirming a statement earlier in the day from the national safety regulator.

The announcement has alleviated market concerns of a simultaneous outage at the processing trains of the 15.6 million mt/year LNG exporting facility and put bearish pressure on LNG prices after several weeks of speculation over cracks at the plant's propane tanks.

Chevron has proposed that Gorgon LNG's Train 1 will be shut down for inspection in early October and Train 3 in January 2021, the Department of Mines, Industry Regulation and Safety's director for dangerous goods and petroleum safety, Steve Emery, said.

DMIRS said it had amended its previous remediation notice that required Chevron Australia to inspect heat exchangers on Trains 1 and 3 at Gorgon LNG by Aug. 21, with the new maintenance schedule.

"Chevron has presented the department with comprehensive safety and technical information that supports an accelerated but staged inspection schedule combined with a range of other controls," it said, adding that this included "details on the origins and nature of the defects as well as the risks associated with various approaches to addressing the uncertainties around Trains 1 and 3."

"The Dangerous Goods Directorate conducted an in-depth review of Chevron's submission and is satisfied the proposal provides an acceptable level of risk under the Dangerous Goods Safety Act," the statement added.

JKM Derivatives saw an almost immediate reaction, with both JKM October and November derivatives trading down to $3.825/MMBtu and $4.425/MMBtu, respectively, from $4.10/MMBtu and $4.625/MMBtu at the Asian time close on Aug. 20.

"The prompt prices are going down now since there isn't going to be a supply constraint any longer. With Gorgon back, less US cargo cancellations for October loading, both Oct and Nov might be crushed since demand has remained weak,” a Singapore trader said.

"There is nothing supporting JKM anymore with the news of Gorgon having a staggered maintenance. Only 6-7 cargoes lost per month when a train is down is not going to have any impact on such an oversupplied market. The US cargoes would be more than make up for Gorgon's lower exports,” another Singapore trader said.

TRAIN 2 MAINTENANCE

Chevron confirmed the revised remediation notice from DMIRS for inspections of propane heat exchangers on Gorgon LNG Trains 1 and 3. It said repairs on Train 2 were progressing and said it expected to safely commence Train 2 restart activities in early September.

"Following the planned restart of Train 2 in September, Chevron plans to temporarily halt Train 1 production to inspect, and if necessary, undertake repairs to its propane heat exchangers,” a Chevron spokesman said.

"Based on our experience on Train 2, inspection, repair and restart on Train 1 could be around 45-90 days,” it said, adding that the combined outcomes from Trains 1 and 2 would inform activity and timing on Train 3.

"We are looking at all options to do the inspections safely and effectively and will continue to provide ongoing updates to the regulator. Chevron discovered the issue during scheduled maintenance on Train 2,” the spokesman added.

Train 2 went offline May 23 for scheduled maintenance, during which a routine inspection of propane heat exchangers found weld quality issues. The train has remained offline since then.

DMIRS' WorkSafe department also issued eight Improvement Notices related to Gorgon LNG on Aug. 21, one for each propane kettle on Train 1, requiring Chevron to conduct inspection by Sept. 4.

"As with all WorkSafe notices, Chevron has the opportunity to seek a review if they do not agree with the notices or to seek an extension of the compliance date,” Director WorkSafe Sally North said in a statement.

Chevron confirmed receipt of the eight notices for Train 1, saying it has requested a review for the previously issued notices for Train 3 and submitted responses to eight notices on Train 2.

(Recasts lead, adds Chevron's confirmation, market comments.)